October 31 - When corn prices are high, demand inevitably falls off thereby rationing the limited supply. All those factors are being seen in current U.S. corn market trends but the pace of declining demand has been slower than expected, says a University of Illinois ag economist.

Writing on the university’s web site, Darrel Good says the small U.S. crop makes it necessary to reduce consumption considerably from 2011-12 levels. Based on the current forecast of the crop size, imports of 75 million bushels, and the assumption that year-ending stocks cannot be reduced below about five per cent of consumption, Good says corn consumption during the current marketing year will be limited to about 11.2 billion bushels. That is 1.326 billion bushels (10.6 per cent) less than consumed in the previous marketing year.

USDA is predicting a decline in consumption of 1.376 billion bushels and year-ending stocks slightly above five per cent of consumption. By category, USDA has forecast that exports will decline by 393 million bushels (25.5%), corn for ethanol and by-products will decline by 500 million bushels (10%), other processing uses will decline by 71 million bushels (5%), and feed and residual use will decline by 412 million bushels (9%).

But things aren’t moving as quickly as expected. To date, the pace of corn exports has been much slower than needed to reach the USDA projection, he says. Exports during the first seven weeks of the marketing year averaged 19.1 million bushels per week. To reach USDA’s projection, weekly exports for the remainder of the year need to average 22.6 million bushels.

Weekly estimates reveal that ethanol production during the first seven weeks of the marketing year was eight per cent less than during the same period last year. For the two weeks ended, Oct. 19, production was down 12 per cent from that of last year. The year-over-year reductions are likely to continue to be large, at least through the end of the calendar year, he predicts.

Still, the current weekly pace is sufficient for corn consumption for ethanol and by-product consumption to reach 4.5 billion bushels for the year. And Good says production won’t be significantly affected by a potential decision to partially waive the Renewable Fuels Standards.